Yesterday we saw the announcement of the long signalled change to the Labour Party’s policy on foreign investment.
Put pretty simply, land sales to foreigners will no longer be automatically approved. There has to be a very very good reason to approve them. There has to be a big value add to New Zealand. That almost certainly couldn’t happen with farms because we do farming so much better than foreigners.
This will mean a few things.
First, farm prices will not continue to spiral upwards out of the range of sharemilkers and others who have traditionally been buyers.
Secondly, the balance of payments will improve because the profits won’t head offshore.
Thirdly, products are more likely to be processed here rather than as part of a massive overseas based integrated operation.
Fourthly, Fonterra will not be a risk of becoming foreign controlled.
The announcement has been widely welcomed.
But Labour is confident that mainstream opinion favours a far more managed economy.
On top of that, the new framework’s emphasis on “owning our future” and restoring the country’s economic sovereignty has potent electoral appeal.
Bernard Hickey and his team are running hard on the issue.
And they are running a poll :-
Do you support Labour’s new policy of blocking foreign ownership of farmland and monopoly assets?
Click on the question to go straight to the poll
We have plenty to lose actually…
We as a country have been borowing to fund our standard of living for years, we’re starting to run out of people willing to give us good credit and all we have left is assets to sell…
This policy is also a breach of our CEA with Australia, if they start changing us landing tariffs in retaliation we’re ****ed…
Also these “foreigners” aren’t buying our land at high prices because they think it’s pretty, they do so because they believe they can increase productivity, etc…
So we are putting productivity increases (and all that goes with it) and free trade at risk…
A policy Winston would be proud of…
@JMH
Hardly, for a lot of the farms I see run by “foreigners” they are fairy unproductive, many think some how cows eat grass which magically turn into money, not quiet. They not buying because they think they can increase productivity, it just a place to lock in there money and get a steady but fairly good return while the demand for milk is high.
The oversea owners hire people for minimum wage, spoil our product with lack standards then sell up becuase the realise they screwed up the land, the farm and the business. Then some one else how to come in and fix it up.
So where not putting ‘productivity increases’ or ‘free trade’ at risk. (not we have much free trade anyway with all the tariffs everywhere)
Trouble is there are alot of kiwis who think the same way. Those idiots need to be bar from farming as well!
“believe they can increase productivity,”
Believe they can make lots of dollars speculating in NZ currency or land.
Can buy waterfront land to retire to cheaper than in Europe.
@Jeremy
“This policy is also a breach of our CEA with Australia, if they start changing us landing tariffs in retaliation we’re ****ed…”
No it doesn’t:
“The CER Agreement contains no specific provisions on investment. Investors of each country are subject to the general foreign investment policies and requirements of the other country”.
Closer Economic Relations: Background Guide to the Australia New Zealand Economic Relationship, Canberra, 1997, para 93
http://www.dfat.gov.au/geo/new_zealand/anz_cer/cer.pdf
I beg your pardon, para 95
Thanks for catching that detail Pete and making sure Red Alert readers have the actual facts.
Some of the land ’sold’ during Labours time has been forestry that went from one japanese owner to an another japanese owner.
Read the last sentence of para95 Pete (CER document)
Graham, “the fullest possible extent” is open to interpretation. I don’t think the Australian government will make much of a fuss, particularly when New Zealanders are subject to their foreign investment regime too http://www.firb.gov.au/content/default.asp
I think it’s worth the risk.
Indeed in 2005 it seems agreement was made to scope out an investment component in CER, but it doesn’t look like any progress has been made since then.
The Australia-New Zealand Closer Economic Relationship, Wellington, 2005, p.29
http://www.mfat.govt.nz/downloads/foreign-relations/australia/anzcer-cep.pdf
I guess I should have said “could be” a breach of CER…
That’ll learn me to trust the editorial in the country’s largest paper:
http://www.nzherald.co.nz/politics/news/article.cfm?c_id=280&objectid=10681475
Quick CV better write a letter to the editor so the “truth” gets out to the hundreds of thousands of NZ Herald readers rather than the hundreds of Red Alert readers…
@JHM
Im pretty sure NZ herald is know as the granny herald, not many people outside of auckland take it seriously.
Personally i think this is a great move by Labour, the direction they are heading has had me smiling for days. At last we have a major party on the left.
That the Herald gives the talking points sent out from the beehive another run through the spin machine isnt surprising.
All ready the ex journalists in Keys propaganda mill have moved on from ‘damaging CER’ to ‘ forcing Kiwis off their farms’
A new apple a day keeps the truth away.
The rubbish about 650,000 ha approved for sale ‘by labour’ ( its done by an independent government office) has been shown to be mostly forestry holdings allready owned overseas going to new overseas owners ( sometimes just a change in the partnership with one dropping out).
Other large holdings have been high country runs sold to new families who wish to live in NZ
Check it out at the OIO online archive ( only back to 2005)
http://www.linz.govt.nz/overseas-investment/decisions/archive/index.aspx
Awesome due diligence, thx GWWNZ.
I see a mid Canterbury dairy farm went for $8.9m this week, a price at the upper end of the scale. All local interest, not a foreigner to be seen driving the price up.
How will Labour’s policy prevent local farmers willingly paying that money? It won’t, because the price is linked to the quality of the asset and the expect levels of payout for dairy
That’s sad
I’m sure Labour will reveal a sensible policy
When the time is right 
!
Seriously? ROI for dairy is pitiful when over the odds are paid for the land. $8.9M for a farm which is going to sell how much daiy product in a year? Less than $2M? Maybe $1.5M? And how much of that is going to be left in earnings after wages, interest and taxes? Half a million? $300K? If you are lucky.
And that’s assuming that the NZD doesn’t keep drifting upwards, which will suppress both sales and NZD earned for the farmer.
Asset prices need to fall and financial capital moved to high value added advanced productive enterprise, not more kg’s of spray dried milk.
CV
I agree. But the point is, local farmers and bankers are seeing opportunities and that is driving prices not foreign buyers.
It said they did 300,00kg of milk a year, which is getting on to $2m at current payouts. MAF has a good model to compare http://www.maf.govt.nz/mafnet/rural-nz/statistics-and-forecasts/farm-monitoring/2010/pastoral/canterbury-dairy/canterbury-dairy.pdf
Bankers are seeing the opportunity to get the 6% interest plus charges that they cannot get overseas.
As I said. Time to take back control of our money supply.
@insider
Cut off silly-easy to get hold of foreign credit. Since the seem to be able to get hold of credit they will bid up prices. What not helping this situation is the fairly high pay outs from fonterra but some of these guys do the math and think they can make it work.
Also, prices have dropped and have been steady.
“I see a mid Canterbury dairy farm went for $8.9m this week, a price at the upper end of the scale. ” It probably already developed and ready to go, just need to put some cows on unless they come with the cows as well, also most of mid Canterbury has already converted to dairying and if it a good size then the price is not that bad!
Undeveloped land for a dairy is usually $3 or $4 million itself for the average size farm. Let alone having to build infrastructure,fences,irrigation, milking shed, farming machinery etc… which is usually another $4 million or $5 million.
@CV
Your average sized dairy farm should be trying to aim for over $2 million a year gross. Most farmers do achieve this and some go higher if it a good season.
Also, we do Add Value with our milk!
Butter, Cheese, Margarine, Yogurt and specialized milk powders which a lot of is exported but your right, we still make a hell a lot of bland milk powder. Mainly becuase it we don’t have enough buyers of the other goods and a lot of nations have tariffs against butter and cheese.